Short-time compensation, also called work sharing, allows workers to receive partial unemployment benefits when employers cut their hours temporarily. The program lets employers experiencing a reduction in business keep valued employees and avoid costs of recruiting and retraining new employees when conditions improve. Workers, in turn, get to keep their jobs.
Work sharing was credited with lowering unemployment in other countries, like Germany and Japan, during the Great Recession. But only 17 U.S. states allowed work sharing at the time, and research shows that, in most of those states, program take-up was too low to significantly mitigate unemployment.
"The Great Recession spurred interest in work-sharing in the United States and in understanding why the program, where it exists, is seldom used." said Susan Houseman, a senior economist with the W.E. Upjohn Institute for Employment Research. "One hypothesis for the low take-up is that most employers simply don’t know about the work-sharing option."
Houseman led a U.S. Labor Department research project to find whether a modest marketing campaign would raise employer awareness of work sharing and whether that awareness would cause more to use the program. The research team, which also included Upjohn’s Christopher O’Leary, found that employers’ lack of knowledge was indeed a barrier.
In three study areas in two states, outreach campaigns—consisting primarily of mailings—significantly increased awareness of the program. Similarly designed campaigns in Iowa and the Portland, Oregon, metro area raised awareness among targeted employers by an estimated 15.6 and 17.8 percentage points, respectively. A slightly more intensive campaign elsewhere in Oregon raised awareness by an estimated 30.4 percentage points.
In Oregon, the outreach significantly increased how many employers set up work-share plans. The number of plans in the area outside Portland doubled, while they increased 58 percent in the Portland-area study.
The extra awareness in the Iowa study didn’t cause a significant number of employers to set up work-share plans. About as many in the control group as the treatment group started plans.
That’s not a surprise, Houseman said, as work sharing is intended to help companies weather temporary downturns. The outreach took place in 2014 and 2015, as Iowa’s economy grew rapidly and its unemployment rate was well below the national average.
If anything, it was more surprising how many Oregon employers took up plans in what was also a healthy economy, Houseman said. The researchers cite several potential factors beyond the economy that could account for the differences between the states, including administrative and technological issues.
Ongoing marketing efforts in other states stand to produce similar increases in awareness. The full effect of that outreach might only become clear in the next recession, however, as employers faced with laying off workers remember they have another choice.
Yet, employers in much of the country still don’t have access to work-share. The program is only available in 28 states, leaving employers in the remaining states without a valuable tool to weather a downturn.
"The only way for workers to access the unemployment insurance program in these places is if they are fully unemployed," Houseman said. "The system encourages layoffs."
The report for the Labor Department is titled, "Demonstration and Evaluation of the Short-Time Compensation Program in Iowa and Oregon." A research brief highlights the report’s findings.